President Ronald Reagan, our 40th President, took office in 1981 and his formula for an economic turnaround was:
o Cut federal income taxes
o Cut the US government spending budget
o Cut useless programs
o Scale down the government work force
o Maintain low interest rates
o Keep a watchful inflation hedge on the monetary supply
o Income tax rates of top personal tax bracket dropped
Today, in our current economic environment, we face many challenges; however, with these challenges, also come opportunities. Economic growth and job creation are critical to our economy, and must be a priority of government as well as to all of us as citizens. The fundamentals of our economy are sound, but the economy is being affected negatively by structural problems within the government in areas such as the housing sector, banking, government intervention, as well as rules and regulations. We need an open and free economic environment which will foster improved confidence, eliminate uncertainty in our future, and allow businesses and individuals to make decisions that will grow our economy.
The current economic environment, which reflects a lack of confidence and excess uncertainty in the future, is a result of government policies that have hindered individuals. It has taken power away from individuals and businesses that should be making decisions and taking actions that would grow our economy.
“Do less harm” should be the motto of our government when deciding how to improve the economy. Our government needs to stop the endless intervening that, in most cases, does more harm than good. We need to:
o Get spending under control in order to cut the budget deficit
o Stop threatening higher taxes
o Stop creating new regulations
Every deficit dollar the government spends is a dollar not available to the private sector. Putting money in the hands of individuals and not the government, allows our entrepreneurial spirit to flourish thus creating jobs and increasing confidence in our future. Our American entrepreneurial spirit made our country the envy of the world and the land of opportunity.
Spending is the root problem of debt and deficits. Like any family or business, the federal government must be responsible and not spend what they don’t have; we must live within our means both personally and as a country. Spending creates the need for taxes and borrowing. As households and businesses know, when you cut your spending you will reduce your debt and deficits.
President Reagan was correct when he said “No” to useless programs. Every business knows when to cut back. Currently, new rules, regulations, and programs are introduced by our administration that do nothing but bloat our government, add additional debt, hinder our workforce, and make us uncompetitive in a global society.
The only net jobs being created are in the public sector. Since 2009, the public sector had a net job increase of 135,000 while the private sector has lost 1.7 million jobs. This brings the national average of public sector employment to 19.2 percent, nearly one-fifth of the total population.
As of October 2014 the Bureau of Labor Statistics states the unemployment rate as 5.8%% for individuals seeking employment. However, this excludes discouraged workers (those not actively seeking work) and the underemployed, which according to economists could raise the true unemployment rate to as high as 15%.
Now is the time to remember and utilize the lessons learned from President Reagan’s approach to our economy; his philosophy is perfect for today’s economic environment. Reagan employed a simple and logical approach to the economy that worked and helped create over 16 million jobs in the 1980’s. Today, our country does not have a money problem; we have a spending problem, which is something President Reagan clearly understood during his time as President. Let’s take a page out of President Reagan’s play book, and get our spending under control.
Listed below are areas (including but not limited to) that the government, with support of Americans, has the opportunity to improve on, which will have a positive impact on economic growth and job creation.
o Repeal and Replace Affordable Care Act (ACA)
o Reestablish Health Savings Accounts
o Medical Liability Reform
o Modernize Medicare Cards
o Improve Housing Market
o Improve Education on All Levels
o Reduce Annual Deficits
o Reduce National Debt
o Reduce Government / Federal Spending
o Repatriate Earnings
o Reduce Bureaucracy
o Streamline Rules and Regulations
o Reform Banking
o Repeal Dodd Frank
o Continue to Work Towards Energy Independence
o Need to be More Pro-Business
o Re-haul and Reduce Size of Environmental Agency (EPA)
o Keep Inflation in Check
o Promote Free Enterprise
o Promote Pro-Market Agenda
o Provide Capital to Small Business
o Tax Reform
o Reduce Business Taxes
o Reduce Corporate Taxes
o Reduce Federal Taxes
o Eliminate Death Tax
o Eliminate Capital Gains Tax
o Small Business Tax Incentive
o Real Estate – Reform Government and Bank Regulations
o Free Exchange of Trade
o Lower Trade Barrier
o Create Demand for Exports
o Debunk Global Warming
o Embrace Change
o Embrace and Understand Globalization
o Improve Technology
o Accelerate Depreciation
o Eliminate Costly Red Tape
o Restore Manufacturing Base
o Buy American
o Let the Free Enterprise System Work
o Ease of Starting a Business
o Invest in Infrastructure
Job Creation: Our government does not create jobs, the private sector does. We need to stop the runaway spending that our government is imposing with stimulus packages in cap and trade and health care reform. All unnecessary government programs hinder not only our economy but also our competitiveness.
When the government spends money, the economy goes down, unemployment goes up and taxes go up. Why does that happen? The government does not create jobs; they destroy jobs when they spend money because they take it from the private sector.
Free Enterprise: In every state, city and town across America, individuals are struggling to build and maintain their businesses, for not only themselves and their employees, but for the millions of Americans who cannot find jobs today and the millions more who will need jobs tomorrow. American free enterprise has lifted this country out of tough times before, and it must be free to do so now and in the future.
Small Business: Businesses with less than 500 individuals employ about half of all Americans, yet they can be subject to tax rates that siphon away one-third or more of their income. Reducing the tax rate will immediately free up funds for small businesses to retain and hire new employees.
Small Businesses, those with 500 or fewer employees:
o In 2011 there were 28.2 million small businesses in America
o Employ about half of all private sector employees
o Between 1993 and 2013, small businesses created 63% (14.3 million) new jobs
Irrespective of whether they pay taxes at the corporate or individual level, small businesses can pay up to 35% of their income in taxes to the federal government:
Ideally, a tax code should do only one thing: raise sufficient revenues to fund the size of government people want in the least economically harmful manner possible.
Corporate tax reform is a must because America now has the highest corporate income tax rate in the industrialized world and it deters investment. But before we reform the corporate tax code, we need to understand that America is an entrepreneurial economy.
We have more than 30 million businesses paying taxes under the individual tax system, compared to 1.7 million paying taxes under the traditional corporate tax code.
Tax Reform: Increased taxes are counter-productive and take money out of the hands of entrepreneurs and businesses. Tax increases create a poor environment for economic growth and are one of the worst things that our country could do during a recession, as it takes money away from Americans when they need it most.
Taxes: The President’s budget proposal would raise taxes by $3 trillion over the next decade, but use most of these new revenues for new spending, not deficit reduction. His budget would add an additional $74,000 per household of debt onto the Millennial generation.
Washington’s threat to impose new taxes and regulations on small businesses has kept businesses from hiring and slowed the job market recovery. Businesses are investing less which translates into less job creation. Although businesses understand that uncertainty is a fact of life, our government’s threats are adding to their insecurity.
Freeze Tax Hikes and Spending: Congress can promote job creation by encouraging entrepreneurship and investment, and by freezing all proposed tax hikes and spending.
Higher taxes will ultimately result in a huge loss of jobs and will stifle growth, the entrepreneurial spirit and initiative.
How do you modernize the federal tax code so that it maximizes economic growth?
• Reducing the overall tax burden leads to faster growth, and a growing economy raises our standard of living and ultimately provides more jobs, higher wages, greater economic opportunities, and will ultimately increase government revenue.
High Corporate Taxes: America has the highest corporate tax structure in the world. The tax code needs to be simplified, overhauled and brackets need to be lowered. All we are doing is providing more money for the government to spend. We are the envy of the world for our entrepreneurial spirit, and we must unleash this giant once again to turn our economy around.
America’s political leadership needs to understand that the tax rates that businesses face in the U.S. place them at a disadvantage compared to our other major economic competitors.
The average combined federal and state corporate tax rate in the U.S. is 39.3%, second among Organization for Economic Co-Operation and Development (OECD) countries to Japan’s combined rate of 39.5%. Lowering the federal rate to 30.5% would only lower the U.S.’s ranking to 10th highest among industrialized countries.
Many states impose state corporate income taxes at rates above the national average of 6.6%. Iowa, for example, imposes the highest corporate tax rate of 12%, followed by Pennsylvania's 9.99% rate and Minnesota's 9.8% rate. When added to the federal rate, these states tax their businesses at rates far in excess of all other OECD countries.
When compared to other OECD countries:
o 24 U.S. states have a combined corporate tax rate higher than top-ranked Japan.
o 32 U.S. states have a combined corporate tax rate higher than third-ranked Germany.
o 46 U.S. states have a combined corporate tax rate higher than fourth-ranked Canada.
o All 50 U.S. states have a combined corporate tax rate higher than fifth-ranked France.
Limited Government / Free Market: What kind of country do we want to leave to our children and grandchildren? America’s Founders looked to the future with optimism and excitement. The time-tested principles of the American Revolution – individual liberty, limited government, the free market and the rule of law – hold true today.
What is Economic Freedom? (entire section uses Heritage Foundation material)
According to the Heritage Foundation, Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.
Economic freedom occurs when entrepreneurs are free to choose their own paths to prosperity. Governments reflect the views of those holding political / economic power and the status quo. Change happens when citizens have the freedom to try new things such as new production processes and new technologies.
Why Does Economic Freedom Matter?
Economic freedom is a crucial component of liberty. It empowers people to work, produce, consume, own, trade, and invest according to their personal choices.
What are the benefits of economic freedom?
Economic freedom brings greater prosperity. The Index of Economic Freedom documents the positive relationship between economic freedom and a variety of positive social and economic goals. The ideals of economic freedom are strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, democracy, and poverty elimination.
The US Isn’t as Free as It Used to Be:
The Heritage Foundation and Wall Street Journal have found that “U.S. economic freedom isn’t what it used to be.” Over the 20-year history of the Index, the U.S.’s economic freedom has fluctuated significantly. During the first 10 years, its score rose gradually, and it joined the ranks of the economically “free” in 2006. Since then, it has suffered a dramatic decline of almost 6 points, with particularly large losses in property rights, freedom from corruption, and control of government’
In 2012 the U.S. was ranked number 10 out of 179 countries. Today in 2014 we are 12 out of 178 countries. We continue to decline because of sharp increases in government spending, costly regulations and policy makers putting special interests before the public’s interest.
Substantial expansion in the size and scope of government, including through new and costly regulations in areas like finance and health care, has contributed significantly to the erosion of U.S. economic freedom. The growth of government has been accompanied by increasing cronyism that has undermined the rule of law and perceptions of fairness
If changes are not made to entitlement programs, regulations and the Affordable Care Act, finishing in the top 10 will remain a thing of the past for the U.S.
Top 12 Economically Free Countries of 2014
1. Hong Kong
5. New Zealand
12. United States
Free Trade: Expanding free trade increases competition which in turn leads to innovation, better and less expensive products and higher-paying jobs for Americans and provides the investment for long-term economic growth and prosperity. Trade is the foundation of the U.S. economy. More than 57 million Americans are employed by companies that engage in international trade – or approximately 40% of all non-farm jobs.
After World War II America’s growth and prosperity was due to the reduction of the state’s role in the economy, breaking down barriers to international trade and investment, and streamlining the rules and regulations that shaped and defined the market.
Trade: Expanding trade will not only create jobs but also focus on relationships with our allies that we cannot afford to lose. An example of this is President Bush forged a close trade relationship with India.
o Only the private sector can lead our country out of a recession
o Free trade and reasonable taxes and regulation
o US trade policy or lack of it is a major threat to American economic competitiveness:
o Seoul reached an agreement with the European Union that will give E.U. based companies an advantage over U.S. competitors in the trillion-dollar Korean market
o Asian nations are tearing down trade barriers among themselves
o Obama administration placed a tariff on Chinese tire imports – requested by the steelworkers union
Health Care: The Health Care bill centers more on government control and less on quality or cost containment. A Health Care tax would fund a Washington takeover of the health care industry, which represents one-sixth of our economy and will require massive new taxes from individuals, families and small and large businesses.
Big government take over of close to one-sixth of our economy has a massive negative impact on the economy, job creation, taxes, job losses and doctor-patient relationships.
We need market reform, portability, allow insurance companies to sell across state lines to encourage competition and drive prices down, tort reform and eliminate fraud and corruption that are costing us billions of dollars a year.
Cap and Trade: Will have a massive negative impact on job creation and the economy.
Hyperinflation: To get our economy moving, we have to be very careful that we do not get hyperinflation, which will cause interest rates to go up considerably having a negative impact on our debt repayment as interest rates will go up.
Non-Taxpayer: A “Non-payer” is a taxpayer whose credits and deductions wipe out any income tax they owe. The Tax Foundation’s annual report shows that there was a record number of “Non-payers” in 2008. More than 142 million returns were filed in 2008 and almost 52 million or 36% had no tax liability.
In fact, some of the non-payers received cash payments as the current tax code authorizes refundable credits like the Earned Income Tax Credit and the Child Tax Credit. The Tax Foundation report stated that these two credits alone resulted in payments of over $70 billion. The growing “nanny state” mentality, the shrinking number of taxpayers and the unsustainable government spending is a disturbing concern.
We as a country are at the virtual tipping point where 50% of our country does not pay taxes and expects to live off the wage earners of our country. Relying on Big Brother as a catchall will ultimately have a negative psychological impact on wage earners who will have to carry the burden of those who are not working. Inadvertently, this will stymie hard work, creativity and that All-American can-do attitude.
Bureaucracy: Bureaucracy in modern usage often equates with inefficiency, laziness and waste. It is oftentimes characterized in the popular imagination as existing solely for itself and only achieving results which end up in enlarging the size of the bureaucracy. The “Peter Principle” is that in a hierarchy every employee tends to rise to his level of incompetence.
Small businesses are overwhelmed with bureaucratic red tape that stifles productivity and adds significantly to costs that are borne by the consumer and makes prospective small business owners wonder if it is even worth starting a company.
Limited Government is the belief in a limited government, fiscal responsibility, free enterprise, and most importantly what makes our country so special, the constitution, as it was written by our Founding Fathers.
Tort Reform: Tort is a system for compensating wrongs and harm done by one part to another’s person, property or other protected interests. Tort Reform refers to proposed changes in the civil justice system that would reduce tort litigation or damages.
The U.S. tort system costs our economy billions of dollars each year. The increase in medical lawsuits has caused medical malpractice insurance rates to rise significantly and has had a very adverse effect on our health care system. Doctors are forced to practice “defensive medicine” thereby raising health care costs for everyone.